Why True Religion Apparel Shares Strutted Down the Runway

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Denim-based premium clothing retailer True Religion Apparel (NAS: TRLG) strutted its stuff this morning with shares up as much as 25% after the company noted that it's exploring strategic alternatives, which could include a sale of the company.

So what: In a statement from the company, True Religion announced the hiring of Guggenheim Securities as its financial advisor and Greenberg Traurig as its legal counsel as it evaluates what it referred to as third-party interest in the company. As one analyst from Caris & Co. noted regarding the potential for a deal, True Religion hasn't done much beyond the denim side of the business, and a private-equity deal could be the impetus to aid its growth potential.

Now what: I feel both vindicated and saddened by today's news. True Religion has been a longtime favorite recommendation of mine and I see a ton of promise in the company as it moves from wholesale denim producer to bricks-and-mortar store owner. True Religion has done a very good job controlling inventory and expanding while keeping the balance sheet out of debt and ripe with cash. The company also recently introduced a dividend that's paying out an insanely good 3.7%. There's a lot to be said as well about Jeffrey Lubell, who founded the company in 2002 and is still its CEO. Founders often have large vested interests in the companies they found and their interests usually align very well with that of their shareholders. The possibility of a buyout is disheartening as I see considerably more long-term potential in the company, but I can understand Lubell's desire to maximize shareholder value in the near-term. It's a situation worth keeping an eye on.

Craving more input? Start by adding True Religion Apparel to your free and personalized Watchlist so you can keep up on the latest news with the company.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.